Morgan Stanley Says NFTs Next to Watch After UST Collapse

Most speculative and leveraged areas of crypto markets now in focus, the bank’s analysts said.

AccessTimeIconMay 16, 2022 at 11:41 a.m. UTC
Updated May 16, 2022 at 8:10 p.m. UTC

Will Canny is CoinDesk's finance reporter.

Bitcoin (BTC) has fallen 40% since April, and this is no longer due to its correlation with equity markets, Morgan Stanley (MS) said in a research report dated May 12.

  • “Hyped and leveraged areas of crypto, such as decentralized finance (DeFi) and crypto-backed stablecoins, are seeing mass liquidations, as it is becoming clearer that all the elevated prices were traded on speculation, with limited real user demand,” analysts led by Sheena Shah wrote.
  • Non-fungible tokens (NFTs) and digital land have been subject to much speculation and inflows, the report says, adding that the reason most people bought these assets was based on the expectation that another buyer would want to purchase them for a higher price in dollars.
  • NFTs are digital assets on a blockchain that represent ownership of virtual or physical items and can be sold or traded.
  • The bank notes that while crypto markets have been trading badly since November, they have been shocked by the collapse of the third largest stablecoin terraUSD (UST) in recent days.
  • Crypto-backed stablecoins have become an important part of the leverage built within the DeFi ecosystem, the note says, adding that this one event has led to increased uncertainty and instability that has resulted in a “broader re-evaluation of where many crypto prices should be trading at.”
  • DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain, without traditional intermediaries.
  • The most speculative and leveraged areas of crypto markets are now in focus as interest rates rise globally and the U.S. Federal Reserve removes liquidity, the note adds.
  • The massive increase in stablecoin market capitalization – a thirtyfold rise since early 2020 – has had an influence on crypto pricing as well, as stablecoins were responsible for providing much liquidity and leverage, the bank says in the note.
  • Morgan Stanley says that its clients are asking whether the large fall in crypto prices and the depegging of stablecoins poses a “more systematic risk for broader financial markets.”


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Will Canny is CoinDesk's finance reporter.

CoinDesk - Unknown

Will Canny is CoinDesk's finance reporter.


CoinDesk - Unknown
Three Arrows Capital Files for Bankruptcy in New York Tied to British Virgin Islands Proceeding

A British Virgin Islands court ordered Three Arrows' BVI branch into liquidation earlier this week.

CoinDesk - Unknown
CoinDesk - Unknown
Cosmos-Builder Ignite Cuts Headcount by More Than 50%, Ex-Employees Say

The reductions come amid a crypto market crash, and after the return of Ignite’s controversial ex-CEO.

CoinDesk - Unknown
CoinDesk - Unknown
India's Day Of Reckoning With ‘Most Controversial Crypto Tax’ Is Here

The country's 1% TDS is predicted to exacerbate negative market sentiment and add to the woes of the crypto community.

CoinDesk - Unknown